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Public Policy Update:

Victory - Congress Passes & President Signs
Bunning / Lewis Foster Care Tax Bill

Victory was achieved on a long-standing ANCOR legislative initiative March 9th when President Bush signed into law an economic stimulus package (P.L. 107-147) that included a foster care tax bill championed for many years by Senator Jim Bunning (R-KY) and Representative Ron Lewis (R-KY). The new law allows payments to foster care families to be excluded from the gross income of a foster family regardless of the age of the individual receiving foster care services and regardless of whether a private entity makes the placement and payments. To achieve this, the new law alters the definitions of qualified foster care payment, qualified foster individuals, and qualified foster care placement agency.

Many ANCOR private providers across the nation help children and adults with mental retardation and other disabilities live in a home in their community—thus, avoiding institutional services—by assisting state and local governments with placements and transmission of payments to foster care families. However, Federal tax law has restricted the exclusion from taxable income of payments only to certain foster care family providers. This inequity in the law has created confusion, unfair tax treatment, and significant problems for certain foster care families who opened their homes to individuals with significant disabilities.

For more than six years ANCOR has actively worked to change the Internal Revenue Code to create fairness in Federal income tax law and to simplify the tax treatment of foster care payments for children and adults whose placement and payments to foster care family providers (also known in some states as host homes or developmental homes) are made by state/local government licensed or certified private agencies.

With the commencement of the 107th Congress in January 2001, the dedication and commitment of Senator Bunning and Representative Lewis were unswerving as they again reintroduced their legislation and shepherded it through their respective chambers of Congress. Their efforts and those of a core group of ANCOR members paid off when the House of Representatives approved March 7th its fourth attempt at an economic stimulus bill—the Job Creation and Worker Assistance Act of 2002 (H.R. 3090)—by a vote of 417-3 and when the Senate followed the House’s lead the next day with a vote of 95-9 for the same legislation.

Changes in the Law

Thanks to the ANCOR initiative, the law is retroactive to December 31, 2001, providing the tax exclusion for foster care payments for the tax year beginning 2002. The amendment to Federal tax law eliminates present restrictions on tax exclusions. Current tax law excludes from taxation only foster care placements/payments made to a foster care family by a state agency or a political subdivision of a state, or placements/payments made in behalf of children (under age 19) by tax-exempt child care placement agencies.

New Law: Qualified foster care payment now means any payment made pursuant to a foster care program of a State or political subdivision thereof which is paid by a State or political subdivision or a qualified foster care placement agency, and now defines qualified foster individuals to include individuals placed by qualified placement agencies. The term qualified foster care placement agency now means any placement agency which is licensed or certified by (A) a state or political subdivision thereof, or (B) an entity designated by a state or political subdivision thereof for the foster care program of such State or political subdivision to make foster care payments to providers of foster care.

The Pursuit of Victory Through a Coalition

Throughout 1996 and 1997 ANCOR began exploring a remedy to the foster care tax inequity. Then in 1998, ANCOR assembled a core group of ANCOR providers involved in foster care services to individuals with disabilities to focus a concerted effort in changing Federal tax law. Known as the ANCOR Foster Care Coalition, these private providers worked tirelessly and in concert with the 105th, 106th, and 107th Congresses to achieve a statutory change to the IRS code on behalf of thousands of foster care families nationwide who provide supports to people with mental retardation and other disabilities. Combining their financial resources, legislative advocacy skills with their Representatives and Senators, and grassroots support from their home states, the ANCOR Foster Care Coalition proved that working together, providers can make a difference in Federal law.

Many ANCOR members contacted their members of Congress on this issue over the years and ANCOR extends its appreciation. Special recognition, however, is due to those members whose legislative advocacy and / or financial contributions made the road to victory possible.

Congratulations to ANCOR Foster Care Coalition

Dave Toeniskoetter of Dungarvin has served as the Administrative Chair of the ANCOR Foster Care Coalition. Overall legislative strategy was developed under the capable leadership of Legislative Committee Co-chairs Kelley Abell of ResCare and Rich Carman of Bethphage. Current Coalition activists include the following: Tim Sullivan (The Institute of Professional Practice, Inc.), Larry Durbin and Julie Fay (Mentor), Barbara Pilarcik (The Association for Community Living), Sharon Walters (Bethphage), Doug Miller (REM), John Voit (Seguin Services), Joe Woodward (Danville Services). Special thanks to the hard work of the Private Providers Association of Texas. In past years, the Coalition was also assisted by Ray Anderson (formerly of VOCA) and Skip Sajevic (formerly of Nekton). A list of organizations providing financial contributions is below.

ANCOR is grateful to Janet Boyd and Janine Jones of the firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P. for their knowledge and expertise on this issue during 1998-2000.

ANCOR extends a special thanks to former ANCOR Executive Director Joni Fritz for her leadership in identifying this issue as a problem in 1993, for devoting ANCOR resources toward a remedy in 1996-1997, enlisting the help of consultant Tom Arnold, and assembling the ANCOR Foster Care Coalition in 1998.